ISLAMABAD: The Federal Board of Revenue (FBR) has said that the formation of an offshore company anywhere, including tax haven countries, by any Pakistani resident with legal money is not illegal.
FBR, in a document sent to the Senate Standing Committee on Finance and Revenue, has categorically said that offshore companies are used for many commercial or private purposes which may be legitimate and economically beneficial or in certain cases harmful and even criminal.
The basic principle of taxation around the offshore companies is to ascertain whether these offshore companies are formed for benign business purpose or legal tax avoidance or for illegal and tax evasion purpose.
If Pakistani national being resident for tax purpose has shifted his after tax money from Pakistan and formed an offshore company in foreign country including tax haven, for benign and legal business pursue, there is no illegality in that case.
However, if any Pakistani national being resident for tax purpose has shifted hidden or untaxed money from Pakistan through covert or illegal channels and formed an offshore company in foreign country including tax haven for the purposes of tax avoidance or money laundering then it would certainly be treated as an illegal action.
Therefore, the briefing papers, said that FBR was of the view point that no legal evidences were available for action and the law would not swing into action over only the name of offshore companies.
In this regard, FBR likely to propose strict measures to the finance ministry for inclusion in budget 2016-17 to plug loopholes in the taxation system to curb tax evasion after the recent disclosures of offshore companies held by Pakistanis.
It is pertinent to note here that in the first week of current month a massive leak of secret files from a Panamanian law firm by International Consortium of Investigative Journalists one of around 100 news organizations and 300 journalists that worked on mining the data simultaneously also reveals the offshore holdings of members of prime minister Sharif’s family.
This disclosure has resulted in political polarization because the opposition political parties have started probe into the method, either legal or illegal, adopted for funds transactions for those offshore companies.
